Indian startup funding drops 50% to $3.8Bn in 2016

Sluggishness in funding has been felt globally with some of the high-flying startups seeing their valuation being cut as sentiments around technology financing took a hit last year.Anand J&Shalina Pillai | TNN | December 24, 2016, 06:30 IST

Funding for startups almost halved this year, down to $3.8 billion compared to $7.6 billion in 2015, as risk investor pushed back with caution after two years of unprecedented exuberance.

The funding crunch impacted the overall ecosystem with the number of startups founded this year going down dramatically, data from startup tracking firm Tracxn showed. More than 9,462 startups (including non-technology startups) were founded in 2015, compared to 3,029 in 2016, according to Tracxn data.

Sluggishness in funding has been felt globally with some of the high-flying startups seeing their valuation being cut as sentiments around technology financing took a hit last year.

The number of startups that shut shop rose to 212 from 144 last year. However, the number of funding deals stood almost the same at 1,031 compared to 1,024 last year.

Padmaja Ruparel, president at Indian Angel Network (IAN) attributed the decline this year to the lack of big fund raising by the unicorns. IAN was the most active investor this year with 36 funding rounds.

“There was a lot of hype, last year, which has subsided a bit. We have seen a lot more committed entrepreneurs this year,“ Ruparel said.

The big startups that raised multiple rounds of funding last year like Flipkart, Quikr, and Grofers did not raise fresh capital in 2016. Among the top ten technology deals were the Ibibo Group and Makemytrip merger, Yatra (acquired by Nasdaq-listed Terrapin for $218 million), and fund raising by Bookmyshow and Hike.

While overall funding was weak, flow of early-stage deals did not see a slowdown. For IAN, the average funding round in 2016 has remained the same as 2015 at around Rs 2.5 crore, Ruparel said.

While last year, they received 6,000 applications, this year IAN received 7,500 applications. “We have seen a wider spectrum of star tupscoming up, with a sharper focus on top and bottom line.“

All the major venture capital funds, which are flush with dry powder, as they have together raised more than $2 billion to invest in Indian startups, took selective bets this year.

New York-based Tiger Global, which was one of the most active funds last year with more than 30 investments, has almost retreated from India as it did not make any new investments this year.